But with only a few months left until the building’s completion, just 15 of the 31 units are under contract or reserved, eight of them with private pools, although sales began in 2014. Since then, the developer has hired three different real estate brokerages to handle sales; the most expensive unit under contract so far is a $10.9 million duplex.
“Our approach is not to cut back,” Mr. Chan, also known as Chan Soo Khian, said of the shifting market. “In fact, what I’ve done is up the ante. A well-crafted building will speak for itself in a difficult market.”
In Manhattan’s new development scene, there are bold bets aplenty, but 2014 it is not. The ultraluxury market, with prices north of $10 million, has softened since the rise of billionaire’s row along 57th Street, and developers are taking note: Some are doubling down on ultraluxury and seeking new ways to stand out, while others pursue an underserved group – buyers willing to shell out between $1 million and $3 million for an “entry-level” home.
Builders who aim somewhere in the middle — in the $5 million to $10 million range — are feeling the tightest squeeze, because of oversupply and a dearth of buyers. And those with buildings under way are facing a tough choice: stay firm on pricing set when the market was stronger, with the risk of getting lost in the mix, or offer concessions to move what hasn’t sold?
Recent data tell a tale of two markets. The median sales price for new development in Manhattan rose to $3.3 million in the second quarter, up a staggering 22.8 percent from the same period a year earlier, according to a Douglas Elliman report. At the same time, the average listing discount, or price drop, for new development was 7.5 percent — far more generous than it was the first quarter, when brokers discounted an average 2.8 percent. A year ago, agents were seeking an average of 1 percent above asking price.
“The expectation was that there are so many billionaires in the world, they’re a dime a dozen – and that’s not what happened,” said Jonathan J. Miller, a New York real estate appraiser.
The record prices of the last few years were driven in large part by contracts for exceptionally expensive units signed as far back as 2013, often before construction began, and because they have taken years to close, “they’ve been padding the market,” Mr. Miller said.
The market peaked in 2014, he said, when cranes seemed to dominate the city skyline. “It completely removed that sense of urgency” to buy, though builders have been slow to respond to the drop in demand, he said, adding that high land prices pushed them to build bigger, more expensive units to hit their margins, leaving less room for flexibility in price.
Now that is catching up with them. About 2,800 new units are expected to come onto the market in 2017, said Kelly Kennedy Mack, president of Corcoran Sunshine Marketing Group, which is about half the original projection.
Recent sales also suggest a shifting focus in the city: The Upper East Side is the top-selling neighborhood for new development this year, she said, with 12 percent of total sales, thanks in part to the new Second Avenue subway line. Midtown West and the Financial District rounded out the top three areas, and half of all new construction in the pipeline will be downtown.
The slowdown hasn’t deterred some very ambitious projects that developers hope will break records with nine-figure price tags. Central Park Tower, a new addition to billionaire’s row on West 57th Street, between Seventh and Eighth Avenues, anticipates total sales in excess of $4 billion, according to documents filed with the State Attorney General. That would make it New York’s most expensive residential tower ever, said Gabby Warshawer, director of research at CityRealty, a real estate data firm. The mixed-use tower, which will have a Nordstrom department store at its base, will have 179 condos, according to paperwork filed by Extell, the developer.
In Lenox Hill, the developer Zeckendorf filed to list a $130 million triplex apartment at the under-construction 520 Park Avenue. Not to be outdone, Vornado Realty Trust, the developer at 220 Central Park South, has filed to list a $250 million, 23,000-square-foot quadruplex apartment in the limestone-clad tower. The current sales record, set in 2015, is a $100.5 million sale at Extell’s One57 tower.
Others are raising the stakes in different ways. Robert Gladstone, chief executive of Madison Equities, is betting that buyers in his Beaux-Arts conversion at 212 Fifth Avenue, in NoMad, will want bragging rights. He decided to scrap plans for two penthouses and create one ultraluxury triplex apartment with 10,000 square feet of living space and a 5,700-square-foot terrace. The asking price: $68.5 million.
“There are fewer people in the world who can buy it. But it’s the penthouse, not a penthouse,” he said. “If someone can spend $50 million, most of them could spend $70 million on an apartment.”
The space will have chevron-patterned flooring, a grand staircase and, as in all the units, a special air-filtration system. “People really dig that kind of detail,” Mr. Gladstone said.
But these are the outliers in a market where apartments priced between $5 million and $10 million are a tough sell.
At the Charles, a vitreous tower under construction on the Upper East Side, 19 of 25 units are under contract, including a penthouse combination that sold for more than $58 million in 2015. The project, developed by Bluerock Real Estate, includes floor-through units with ceilings some 12 feet high and panoramic city views. But the last six units, four-bedroom apartments near the top of the building, will soon be relisted at lower prices — around $7.5 million, down from about $8.8 million earlier this year — said Frances Katzen, an associate broker with Douglas Elliman, who is leading sales.
“These are the crème de la crème, drop-dead gorgeous apartments,” she said. The building will not be completed until early 2018, but even so, she added, “We have to be cognizant that we’re not the new kid on the block; we have to make it a value proposition.”
On the more “attainable” side, some developers have found their niche with what are considered starter units in today’s luxury market. At Steiner East Village, a blockwide, six-story brick building where one-bedrooms start at $1.15 million, the developer has raised prices eight times since 2015, from an average $2,114 a square foot to $2,238 a square foot, an aggregate increase of $7.26 million, he said.
“It’s the polar opposite of billionaire’s row,” said Doug Steiner, chairman of Steiner NYC, the developer. While prices in the building top out at $11.25 million for four-bedroom apartments, the 81-unit building is two-thirds sold out.
“I think we hit the sweet spot,” Mr. Steiner said, noting that 80 percent of the units are one- and two-bedroom apartments with ceilings over 10 feet tall, wine refrigerators and laundry facilities.
At Vitre, a 21-story tower on 96th Street, one-bedrooms start at $915,000 and the most expensive unit is a $4.29 million, three-bedroom penthouse. The building has also benefited from being near the recently opened Second Avenue subway extension, said Stephen Kliegerman, president of Brown Harris Stevens Development Marketing, who is in charge of marketing. Stephen McArdle, an associate broker with Brown Harris Stevens, said that sales began in June and all the contracts have been at asking price.
But while this “starter” market moves the fastest, it also has the least inventory. The cheapest unit in Vitre — the $915,000 one-bedroom — is $1,753 a square foot. And in the second half of 2017, only 25 units, or 1 percent of all new inventory, will average less than $1,800 a square foot, according to Corcoran Sunshine.
At One Manhattan Square, a massive 815-unit tower on the Lower East Side, the developer, Extell, is pitching a “vertical village” with 100,000 square feet of amenities, including a bowling alley, an adult treehouse and a Turkish-style hammam. But the prices, which range from $1.2 million for a one-bedroom to $13 million for the penthouse, tell the real story.
As Anna Zarro, head of sales for Extell Marketing Group, noted, almost half the units will be one-bedrooms, which is “indicative of the bifurcated market.” The $1 million to $3 million market is the most robust, she said, followed by the tippy-top luxury sector.
For Yan Wolfson, 53, a urologist in contract to buy a three-bedroom apartment in the under-construction tower, the fancy amenities are appealing, but there was a more pressing reason to buy: to escape the property taxes on his current apartment in the Financial District, where he lives with his wife, Anyssa, a legal secretary, and their three children.
“Just think about it — $74,000 – that’s a mortgage on a palace somewhere outside the city,” Dr. Wolfson said of his annual tax bill, which rose significantly when a tax abatement on his apartment ended recently. “It was a very bad day.”
Realizing the tax bill would eventually force his family to move, he decided to start looking for a new apartment. And unlike other buildings that have run through their tax abatement benefits, One Manhattan Square qualified for the 421-a tax abatement program just before it expired in 2016. In exchange for reserving a percentage of units for the affordable housing lottery, the developer will pass on a tax discount to buyers that will gradually diminish, over a 20-year period.
Dr. Wolfson bought a three-bedroom apartment on the 48th floor, in the $3 million range. The new place, at about 1,500 square feet, is half the size of his current one, he said. But the amenities will help make up for it, as will the new tax bill. In the first year, it will be about $370.
The only hitch: Like many of the new towers selling units this year, the building won’t be completed until 2019.
That means two more years of those high-five-figure taxes, he said ruefully. “We’ll just have to suck it up.”